DOJ statement on $22M settlement from lenders

Prepared statement by Assistant Attorney General Thomas Perez on the Bank of America, Morgan Stanley settlement to military borrowers, announced May 26:

Good afternoon. Thank you for joining us today to hear about two settlements that will provide critical relief for some of the men and women who serve our nation in the armed forces, and their families. I want to thank our partners at the Department of Defense for their help in these cases and in protecting the rights of servicemembers.

The Civil Rights Division enforces several laws designed to protect the rights of members of the military – so that their brave and selfless service doesn’t put them at risk of losing their jobs at home; so that they don’t have to forfeit their right to vote; so that they can be assured they and their families in the consumer context will not be penalized for their courageous decision to serve our nation.

The Servicemembers Civil Relief Act, or SCRA, provides critical additional consumer and other protections to the men and women serving our nation in the military – it was a recognition that those who are making great sacrifices to protect us deserve to know that we have their backs at home.

The law postpones, suspends, terminates, or reduces the amount of certain consumer debt obligations so that members of the armed forces can focus their full attention on their military responsibilities without adverse consequences for themselves or their families. This means that a soldier won’t have to worry that his or her car will be repossessed while they’re on the front lines overseas. It means that instead of worrying that their spouse and children will be evicted while they’re deployed, they can focus on the critical role they play in protecting our nation.

Among these protections is a prohibition on foreclosure of a servicemember’s property without first getting approval from the court if the servicemember purchased the property prior to entering military service. In the course of our investigations that led to the settlements we’re announcing today, we’ve seen the consequences that can occur when this provision is violated.

For example, we encountered a case involving a servicemember who was severely injured by an Improvised Explosive Device while serving in Iraq, breaking his back and causing traumatic brain injury. The servicer foreclosed on him, despite receiving notice on multiple occasions that he was serving in Iraq. He returned to the United States in a wheelchair with the prognosis that he would never walk again. He spent two years in recovery, during which time he re-learned how to walk and eventually run; however, he still suffers from the impact of the traumatic brain injury.

In another case, we encountered a victim who suffers from Post-Traumatic Distress Syndrome after a tour in Iraq in 2003-2004. Consequently, he regularly receives counseling and takes medication to address his nightmares and nervous condition. In an attempt to avoid foreclosure on his home, he notified the servicer of his active duty status and provided copies of his orders. However, the servicer foreclosed on him twice despite notice of his protected status. In addition, his credit score has been negatively impacted and he has been unable to obtain credit.